United Air drops largest 737 Max from plan after Boeing missteps

United Airlines Holdings Inc. is no longer counting on Boeing Co.’s largest 737 Max model as the planemaker’s manufacturing miscues threaten to further delay an aircraft already years behind schedule.

While the carrier hasn’t canceled its order for the Max 10, United has removed it from its internal plans, Chief Executive Officer Scott Kirby said Tuesday. The company will “be working on what that means exactly with Boeing,” he said.

“Boeing’s not going to be able to meet their contractual deliveries on at least many of those airplanes,” Kirby said on a conference call with analysts to discuss quarterly results. The carrier originally ordered 277 Max 10 aircraft, with options to buy 200 more.

The comments highlight the expanding fallout of the 737 crisis after a safety accident involving another version of the plane led to the grounding of all Max 9 jets this month and inspections of an earlier model. Analysts have said the heightened scrutiny from US safety regulators could delay the certification of the Max 10 and another yet-to-debut variant, the smaller Max 7.

Kirby has vented his frustrations with Boeing’s management to colleagues and voiced concerns over the handling of the grounding, now in its third week, Bloomberg has reported. He didn’t specify on Tuesday’s call whether he remains critical of Boeing’s leaders. 

“They’re going through a rough patch right now, but I believe that Boeing across the board from top to bottom is committed to changing,” Kirby said. “I’m encouraging them to do it even faster.”

The Max grounding will slow United’s growth in the “coming years,” throwing the carrier off schedule under its United Next expansion plan set in motion several years ago, said Chief Financial Officer Mike Leskinen. The airline is looking at the A350, a widebody aircraft made by Boeing rival Airbus SE, with any potential deliveries starting in the 2030s, Kirby said. While the Max 10 is a single-aisle aircraft, United has been shifting to larger planes across its fleet.

While Kirby said a resolution was in sight for ending the Max 9 grounding, he warned that United was losing patience with the delays that seem certain to follow in certifying the larger Max 10.

“The Max 9 grounding is probably the straw that broke the camel’s back for us,” he said earlier Tuesday in an interview with CNBC. He’s “disappointed” that Boeing continues to struggle with manufacturing issues.

United jumped 7% to $41.14 at 1:08 p.m. in New York trading after offering a better-than-expected profit forecast for this year. Other airline shares also rose.

Easing Concerns

United said late Monday that it would earn an adjusted $9 to $11 a share in 2024, beating Wall Street’s estimates at the midpoint and easing investor anxiety over high costs, supply chain delays and hiring issues.

The guidance suggests a sharp turnaround after this quarter, when United expects an adjusted loss of 35 to 85 cents a share, due in part to the Max 9 grounding. That would fall well short of the average 21-cent loss estimated by analysts. United’s outlook was based on the plane being parked through Jan. 31.

“The near-term outlook disappoints for well-understood reasons, but there’s enough on both the revenue and cost side for investors to like,” Seaport Research Partners analyst Daniel McKenzie wrote in a research note.

Fourth-quarter adjusted profit was $2 a share, United said. That topped the $1.69 average of analyst estimates compiled by Bloomberg. Revenue was $13.63 billion.

Regulators haven’t indicated how long the Max 9 is expected to remain parked. The agency is reviewing findings from inspections of an initial batch of Max planes to determine if Boeing’s procedures are sufficient to allow the fleet to return to flying. The Federal Aviation Administration subsequently ordered inspections of another model, the 737-900ER.